BY VICTORIA ONU, ABUJA
Within an eight-month period, covering January to August this year, the Nigerian National Petroleum Corporation under-remitted the sum of N1.24trillion to the Federation Account, The Point can authoritatively report.
Details of the under-payment are contained in the NNPC Report for September, which the Corporation submitted to the Federation Accounts Allocation Committee.
The report was obtained by The Point on Sunday in Abuja.
The FAAC Committee, headed by the Minister of Finance, Zainab Ahmed, is made up of Commissioners of Finance from the 36 states, representatives of revenue generating agencies such as NNPC, Federal Inland Revenue Service, Department of Petroleum Resources, Central Bank of Nigeria, and Nigeria Customs Service, among others.
The NNPC is one out of government agencies that remit revenue into the Federation Account.
But investigation by THE POINT revealed that the statutory payments made by the NNPC to the Federation Account, a joint pool operated by the local, state and federal governments, declined by 74.37 per cent in the first eight months of 2021.
An analysis of the data from the NNPC showed that the corporation was only able to remit N429.28billion out of the pro-rated sum of N1.67trillion, leaving a shortfall of N1.24trillion.
A breakdown of the N429.28billion showed that the NNPC remitted N90.86billion in January, N64.16billion in February and N41.18billion in March.
While the Corporation did not remit any amount in April, it was able to pay the sum of N29.647billion into the Federation Account in May, while it paid N47.16bn, N67.28bn and N80.03bn in June, July and August, respectively.
In recent times, the burden of fuel subsidy had made it difficult for the NNPC to meet up with its obligations to the Federation Account.
Findings by The Point revealed that in the first five months of this year, the NNPC incurred the sum of N274.03billion as subsidy payment for Premium Motor Spirit, popularly known as petrol.
A breakdown of the N274.03billion subsidy payment showed that the NNPC incurred the highest sum of N126billion in the month of May this year.
This is about 45.98 per cent of the entire N274.03billion subsidy paid by the NNPC between January and May.
Further analysis of the report showed that the Corporation paid the sum of N25.37billion as subsidy in February.
It also paid N60.39billion and N61.96billion in March and April, respectively.
The Federal Government had in the 2021 budget abolished the payment of fuel subsidy as no provision was made for such expenditure.
As a result of the non-provision of fuel subsidy in the 2021 budget, the burden of the payment of subsidy has been pushed to the NNPC in the form of under-recovery.
Under-recovery usually arises from the price differential between the landing cost and the pump price of petrol.
With the deregulation of the downstream sector last year, the price of petrol had risen from N121.50 to N123.50 per litre in June, to between N140.80 and N143.80 in July last year, N148-N150 in August last year, N158-N162 in September 2020, and N163 in November last year.
Since November last year, the price of petrol had remained unchanged despite the increase in crude oil prices in the international market.
As of the time the fuel subsidy was removed in June last year, the price of crude oil was about $45 per barrel.
But as of Friday last week, the price of crude oil had increased to about $79.35 per barrel. This price is far higher than the 2022 Federal Government budget benchmark price of $57 per barrel.
What this means is that while expectations are high that there will be more revenue to be earned from crude oil sales by the NNPC for the government, the adverse effect would be on the imported price of crude oil.
And with the continuous push for subsidy payment, it therefore means that the NNPC will continue to bear the burden of subsidy payment through the reintroduction of under-recovery.
“An analysis of the data from the NNPC showed that the corporation was only able to remit N429.28billion out of the pro-rated sum of N1.67trillion, leaving a shortfall of N1.24trillion
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The implication of this is that with the under-recovery element of cost being borne by NNPC with subsidy reintroduction, the amount that is being remitted by the Corporation into the Federation Account will be significantly reduced.
The Minister of Finance had, during the public consultation of the Medium Term Expenditure Framework/Fiscal Strategy Paper for 2022-2024, described the amount spent on subsiding petrol as a drain on the economy.
She said that a whopping sum of N900bn would be spent next year in subsidising the price of Premium Motor Spirit, adding that such would have been spent on more productive sectors of the economy such as health, education and infrastructure.
Ahmed said, “This is costing us big time. We are spending over N150bn on subsidy, that means NNPC has to use that amount of money to pay for PMS and distributing it. That is money that the federation account can share.
“We are being penny wise pound foolish to think that by giving this subsidy, citizens are benefitting. At the end of the day, the citizens are actually the ones that are carrying the brunt of the wealthy.”
Speaking on the development, the President, Association of Capital Market Academics, Prof. Uche Uwaleke, said the solution to revenue shortfall was for the government to give the states some power in their areas, allow them to exploit their resources, export and bring the money to the center.
He said the country’s over-dependence on oil revenue was hurting the economy as other areas that would yield revenue had yet to be fully harnessed.
Uwaleke, who is also a former Commissioner for Finance in Imo State, said, “The solution to this issue of diversification is to give the states some power in their areas, allow them to exploit the resources in their areas, export and bring the money to the center.
“Whether you call it restructuring or whatever it is, allow the states to have some power to control resources in their areas, that is why it is difficult to diversify.
“For example, mineral resources are still being controlled by the Federal Government, state governments do not yet have power over resources in the state, and the state governor cannot attract investment into the state.
“For mines, there would be challenges with the Federal Government, so state governments should be empowered to control the resources in their states; there is no state that does not have resources. So, I think restructuring will go a long way.”
“The federal should hands off resources, states are in a better position to handle resources. For us to diversify away from oil, we need to restructure, give more power to the state governments, otherwise, we will keep going in circles,” Uwaleke said.
